Is CWG Holdings Berhad (KLSE:CWG) A Risky Investment?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, CWG Holdings Berhad (KLSE:CWG) does carry debt. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

What Is CWG Holdings Berhad's Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 CWG Holdings Berhad had RM17.9m of debt, an increase on RM7.36m, over one year. However, it does have RM24.9m in cash offsetting this, leading to net cash of RM6.99m.

A Look At CWG Holdings Berhad's Liabilities

Zooming in on the latest balance sheet data, we can see that CWG Holdings Berhad had liabilities of RM40.4m due within 12 months and liabilities of RM11.5m due beyond that. Offsetting this, it had RM24.9m in cash and RM27.6m in receivables that were due within 12 months. So these liquid assets roughly match the total liabilities.

This state of affairs indicates that CWG Holdings Berhad's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the RM55.0m company is short on cash, but still worth keeping an eye on the balance sheet. Simply put, the fact that CWG Holdings Berhad has more cash than debt is arguably a good indication that it can manage its debt safely.

See our latest analysis for CWG Holdings Berhad

Although CWG Holdings Berhad made a loss at the EBIT level, last year, it was also good to see that it generated RM10m in EBIT over the last twelve months. When analysing debt levels, the balance sheet is the obvious place to start. But it is CWG Holdings Berhad's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While CWG Holdings Berhad has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the most recent year, CWG Holdings Berhad recorded free cash flow worth 77% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

While it is always sensible to investigate a company's debt, in this case CWG Holdings Berhad has RM6.99m in net cash and a decent-looking balance sheet. The cherry on top was that in converted 77% of that EBIT to free cash flow, bringing in RM7.9m. So we don't think CWG Holdings Berhad's use of debt is risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for CWG Holdings Berhad you should know about.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.